Which of these is the screamin’ real estate bargain?

filed under: Buyers, Sellers posted on November 20th, 2009

Which of these is the killer real estate bargain? (See the answers below–these are true stories based upon real estate sales in Sonoma County over the last year–details have been eliminated for obvious reasons.)

1) an REO (bank-owned) home in Rohnert Park/Cotati that sells for $304,000 with 19 offers. Original asking price $256,000. Nearly 20% over asking price.

2) a country property in Healdsburg with two cute cottages that nearly sells for $137,500 under asking price.

3) a country property in Sebastopol that sells for full asking price ($1,750,000) with four cash offers.

4) an REO in Santa Rosa that sells for asking price with two offers.

5) a cute country property in Sebastopol that sells in a week for 95% asking.

6) a fixer (read:teardown) with a bad floor plan on a busy street that sells after a year on the market for 50% of the original asking price.

7) a cosmetic fixer on a great lot with good bones and multiple offers, sells 5% over asking.

8) property someone buys from a friend of a friend before it hits the market at 10% less than the supposed listing price because the seller doesn’t want the hassle of selling or to pay commissions.

ANSWER:

1) A BARGAIN–Are you crazy? The buyers paid $48,000 over asking.

Yes but the bank significantly underpriced the property by not attributing enough value to the oversized, landscaped 1/3 acre lot with its own redwood tree and raised beds for gardening. A most unusual feature that attracted a horde of buyers. Fortunately my wonderful clients prevailed and bought a home for the price that was their target price all along. Now they have a house payment lower than the rent they were paying previously, before taxes. For their first home, a bit of country in a great commute location, with no repairs beyond their budget or skill set. It even appraised at full price.

2) A BUST: It seems like a bargain on paper, but what if the original sales price was about $175,000 too high and the property sits and sits and sits. Even with a $137,500/16% price reduction, the buyer might be paying too much. This property is still sitting on the market racking up interest and taxes.

3) A BARGAIN: A great retreat property that sold in about five minutes with a few offers in the dead of last winter. Clearly priced right to attract interest and a turnkey property with lots of staying power and redeeming value.

4) A BARGAIN: A perfect home for the buyer’s daughter and her family. The floor plan was perfect for them and the home had been largely remodeled before it went to foreclosure. Prices have moved up a few percentage points since then.

5) A BARGAIN; Gee, only 5% off list? But this property has such fabulous fundamentals: great setting, updated, close-in to town country location, privacy, it fits the buyers’ budget. Let’s face it, it is always going to be a desirable property. And the buyers will enjoy it for a long time.

6) Eventually, a BARGAIN: This property will always have the negative of being on a very busy street–but the eventual sales price justified the case for the investor who bought this property to rehab. Just don’t expect it to appreciate as much as something with better fundamentals. But it finally penciled out.

7) A BARGAIN again. This property was well marketed, the listing agent astutely priced it slightly under where she thought it might eventually sell–it inconvenienced the current owner a shorter amount of time due to the quick sale, and everyone was happy.

8) WHO KNOWS? What we do know is that the seller may have left money on the table by selling his property for less than it is worth, or the buyer may have overpaid. Maybe they hit it just right, but the market did not test the value of the property, so it is a bit of a gamble for both.

Maybe you get the point? A bargain is in the eye of the beholder, and not necessarily related to list price versus sold price. That says more about the skills of the listing agent then the negotiating prowess of the buyer. Sale prices of property seek the proper level when well exposed in the marketplace. Sometimes overpaying makes sense. Sometimes underpaying is still overpaying. If a property meets the buyer’s needs, fits their budget and they love the idea of owning it, then that’s a bargain.

posted by Pam Buda // Comments Off on Which of these is the screamin’ real estate bargain?